Are Rent Payments Tax Deductible in Michigan?
- Typically, as a Michigan taxpayer you are not permitted to deduct an expenditure from your income taxes unless the expenditure has been defined specifically as tax deductible. For example, contributions to a qualified retirement account are in some cases tax deductible, as are contributions to charitable causes. Tax deductions are sought by taxpayers because they reduce taxable income: Less taxable income means a lower income tax bill.
- There is no federal deduction or renter's credit for rental payments made by a Michigan housing tenant to a landlord. Meanwhile, homeowners are allowed to deduct mortgage interest costs, along with related expenses, as an itemized deduction on their federal tax returns, which can in some cases lower a homeowner's tax liability considerably. Homeowners are also permitted to deduct property taxes. This disparity in tax treatment exists even when the renter and homeowner live in similar properties in similar locations.
- While Michigan renters are not provided with any federal tax breaks for rental payments, they can sometimes take advantage of the Michigan Homestead Property Tax Credit. This credit is available both to homeowners and to renters, provided they live in a property for which property taxes are paid. The tax credit can be used only on Michigan state income taxes. Only those earning a household income of less than $82,650 are entitled to claim the credit.
- One method by which Michigan renters may be able to take a tax deduction for a rental property is to maintain a home office. The home office deduction is available to business owners who use a dedicated portion of their home for business purposes. The amount of rent that is deductible for a home office depends on the portion of a home used as an office. Rules for the home office are strict and include a requirement that the home office be used exclusively for business purposes.
